Income Protection: Not just a nice to have…

An increasing number of UK employers now offer Group Income Protection cover to some or all of their employees. That said, we’re aware that many HR and Finance professionals are still confused about the nature of such plans, so let’s start at the beginning.

Income Protection is an insurance product that provides a continuation of an employee’s salary (or at least a part of that salary) in the event that the employee is long-term absent from work through a medically accepted illness or injury. And given that in the UK you are three times more likely to suffer a long term illness than die before retirement age*, it is clear that this is an important and necessary product, and provides an important safety-net for many employees and their families.

It is also worth highlighting that most employees are unaware of the financial impact of absence, and overestimate the level of state support in such circumstances. We covered this point in detail last year, and that post can be seen here.

Yet despite the stark facts above, only a minority of employees are as yet covered for this key employee benefit. Cost may be a barrier for many employers of course, and that is why the recently published report “The Benefits of Early Intervention & Rehabilitation” by the Centre for Economics and Business Research Ltd (CEBR) may be of use to many of our followers. The report highlights that employers can get a direct return of £61 for every £100 spent on Group Income Protection by avoiding Occupational Sick Pay and other costs associated with sickness absence.

Employers that utilise the early intervention services provided free of additional cost with many Income Protection plans – and accessible from much earlier in the employee’s absence period – can ratchet up the savings even further. The report mentions that early intervention services (when used) can shorten the absence period significantly, with a 17% reduction in the average 7 year duration of a claim. That may not sound much, yet equates to more than a years’ worth of income and will therefore represent a significant monetary amount.

Of course the above figures only relate to direct costs and benefits. Other costs and benefits are much more difficult to quantify – for instance the impact of absence on customer relationships and a wider sense of wellbeing for a workforce with access to early intervention services as well.

On top of these items are the more mundane, but no less important, items such as ticking of the “moral responsibility” box for employers with a long term absentee. By the same token Income Protection will provide employers with peace of mind that an unexpected absence will not become a financial drain on the employer’s resources.

So I would encourage employers to more actively consider Income Protection as a core benefit. And for those far-sighted employers who already provide this service, I would urge a greater use of early intervention services to reduce absence duration and maximise the return on their investment.

For more information, please speak to your usual Jelf consultant.

For the full original article and other similar posts please visit the Jelf Group blog